Regulation by Litigation is the use of Federal litigation by private or public parties to achieve policy goals that could not be achieved through the legislative or regulatory processes. Regulation normally takes place through two complementary political processes. First, the Congress enacts legislation, and second, Executive Branch agencies implement and enforce the enacted laws through the promulgation of regulations – an administrative process open to public participation and review.

In recent years, however, a new regulatory mechanism appears to be growing: "Regulation by Litigation." More specifically, private parties and Federal agencies seek to use litigation to bypass Congress and the regulatory process established by Congress in the Administrative Procedure Act. When a regulatory policy goal cannot be achieved legislatively or through the issuance of rules and regulations, private parties and Federal agencies have, on many occasions, sought to shift the power to tax and regulate businesses into the courts and out of the hands of our legislative representatives, thus avoiding open legislative procedures, public participation, and administrative due process.

Private parties have engaged in Regulation by Litigation by seeking to have a Federal court’s order supplant the administrative and regulatory procedures already established by a Federal agency after full opportunity for public participation and comment on these procedures.

Federal agencies engage in Regulation by Litigation by seeking judicial solutions to issues for which they do not have a sufficient statutory or regulatory authority.

Federal agencies also have engaged in Regulation by Litigation by serving as a catalyst to have a third-party sue the government, e.g., by giving grants to third-parties to bring such suits, and also by encouraging a third-party to file a "friendly lawsuit," followed by the agency intervention seeking a consent decree containing provisions not authorized in a statute or regulation.

Regulation and litigation serve fundamentally different purposes in society. The two processes operate under very different rules and were never intended as substitutes for each other. The judicial process is a closed system that excludes virtually all stakeholders except the plaintiffs and defendants. In contrast, the regulatory system allows and encourages all interested parties to participate with equal standing in the process of developing the government’s regulatory policy. Blurring the functions of the two systems through Regulation by Litigation results in the great majority of the public being excluded from the regulatory policy making process. This is the essence of Regulation by Litigation: changing public policy without permitting the public participation and oversight inherent in legislative and regulatory processes.